How Much Will Rides Business Hurt Uber's (UBER) Q2 Earnings?

Uber Technologies UBER is scheduled to report second-quarter 2020 results on Aug 6, after market close.

Let’s take a look at the factors that are expected to have influenced the company’s second-quarter performance.

Weakness in the Rides business, thanks to coronavirus restricting people to their homes, is anticipated to have weighed on Uber’s top line. Significant decline in rides volumes is expected to get reflected in rides revenues. The Zacks Consensus Estimate for rides revenues in the second quarter indicates a 71.5% plunge from the previous quarter. The consensus estimate for total revenues hints at a 38.7% fall from the last-reported quarter and the same for rides gross bookings suggests a 67.4% sequential drop.
Moreover, the company estimates second-quarter revenues (on a reported basis) to have been dented by $60-$80 million owing to certain expenses incurred in the quarter, recorded as Contra Revenues. Additionally, akin to the past few quarters, the company’s bottom line might reflect rise in operating expenses.

The loss of revenues due to downturn in the Rides business is expected to have been partly offset by substantial rise in revenues from the Eats business. With people mostly staying indoors to avoid virus concerns, Uber’s food delivery business, Uber Eats, experienced a significant boost. The Zacks Consensus Estimate for Uber Eats revenues implies a 32.8% increase from the first-quarter 2020 reported figure. The same for Uber Eats gross bookings indicates a 38.5% surge from that reported in the previous quarter. The company estimates second-quarter bookings on Uber Eats to have soared more than 100% year over year.

What the Zacks Model Unveils

Our proven model does not conclusively predict a beat for Uber this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. However, that is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Uber has an Earnings ESP of -2.67% as the Most Accurate Estimate is pegged at a loss of 80 cents, wider than the Zacks Consensus Estimate of a loss of 78 cents.

Zacks Rank: Uber carries a Zacks Rank #3.

Highlights of Q1 Earnings

In the last-reported quarter, Uber incurred a loss of 64 cents per share, narrower than the Zacks Consensus Estimate of a loss of 79 cents. The amount of loss also narrowed significantly year over year. Moreover, total revenues of $3,543 million surpassed the Zacks Consensus Estimate of $3,381.5 million. The top line also rose 14.3% year over year owing to a significant rise in Uber Eats revenues.

Stocks to Consider

Investors interested in the broader Computer and Technology sector may consider Advanced Energy Industries AEIS, ANGI Homeservices ANGI and Arlo Technologies ARLO as these stocks possess the right combination of elements to beat on earnings this reporting cycle.

Advanced Energy Industries has an Earnings ESP of +1.22% and a Zacks Rank #3. The company will report second-quarter 2020 results on Aug 5.

ANGI Homeservices has an Earnings ESP of +100% and a Zacks Rank #2. This company will release second-quarter 2020 financial numbers on Aug 10. You can see the complete list of today’s Zacks #1 Rank stocks here.

Arlo Technologies has an Earnings ESP of +3.23% and a Zacks Rank of 3. This company will announce second-quarter 2020 earnings numbers on Aug 5.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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